Medicare waste

Our view: Billions in extra payments to private insurers leave seniors without added benefits

December 03, 2008

Private health insurance plans that serve nearly a fourth of all Medicare beneficiaries, including more than 40,000 in Maryland, were set up under the assumption that the private companies could provide the same services as Medicare at a lower cost. Instead, many have significantly increased costs without improving care, a new analysis of the Medicare Advantage program shows.

It's time for the multibillion-dollar waste to end. Congress should act early next year to reduce these payments to private insurance companies to the level of traditional Medicare. That could save $160 billion over the next 10 years, money that would be better spent offsetting the soaring costs of Medicare as a flood of baby boomers join the program.

Enrollment in private Medicare fee-for-service plans has exploded to 2.3 million recently from just 26,000 at the end of 2003. That growth has driven up costs because the government pays the private insurers 13 percent on average more than it would spend for the same number of beneficiaries receiving traditional Medicare.

In Maryland, the extra money raked in by the insurance companies added an estimated $28.7 million to the cost of Medicare last year - $16 million to private insurers and $12.7 million in increased premiums paid by seniors participating in Medicare Part B, according to the analysis by the USAction Education Fund for Progressive Maryland, a liberal advocacy group here.

In a campaign debate this fall, President-elect Barack Obama described the extra costs as a "giveaway" to private insurers. And former Sen. Tom Daschle of South Dakota, who has been picked by Mr. Obama to become secretary of health and human services, recently warned that such overpayments to insurance companies are threatening Medicare's solvency.

Last year, Progressive Maryland complained that the private insurers change their Medicare benefits packages in ways that discriminate against sicker seniors who need more care. That means privatized plans are allowed to skim off the least costly beneficiaries in order to increase their profits.

While most of Maryland's Medicare beneficiaries remain in traditional Medicare, they all pay higher Part B premiums to help subsidize the privatized Medicare plans. It's time to lift that burden and end these handouts for private insurance programs that provide limited or no medical benefits in return. At a time when the government is hard pressed to pay the increasing costs of care for Medicare recipients, the value of any spending should be visible.

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